Turnover for F1′s commercial activities exceeded $1 billion last year, according to annual figures released by Formula One Administration, which represents a $19 million increase on the previous year. The teams’ share increased by $114 million to $658 million.

Photo: Darren Heath

Although this equates to an average of $54 million for each of the 12 teams in F1 last season, it doesn’t work out that way as the money is not split evenly. It is paid out according to several columns laid out in the Concorde Agreement, whereby prizemoney share goes with success; the champion team receives more than lower placed teams, while there is another column rewarding teams with a long history of success, like Ferrari, McLaren and Williams.

The interesting thing about the FOA accounts is that the sport has been able to marginally increase revenues at a time when the world has been going through a severe economic downturn. The addition of new races obviously contributes to the rise, as do new Global Partner deals like the ones with UBS, DHL and LG as well as new TV rights deals and renewals.

However it doesn’t match up to what was expected when the debt was taken out on the business shortly after CVC took a stake in 2005. According to a document produced by RBS and Lehman Brothers in 2006, when the F1 debt package was offered to the markets, the projected turnover for 2010 was expected to be $1.28 billion, while payments to teams for 2010 were projected at $622m, lower than the amount they got. It’s interesting to compare these with the reality. Growth was expected to be 5.1% compared to 2009.

We heard from Jean Todt at the weekend that he would like to review the FIA’s share of the commercial revenues of the sport and the teams will also be looking to increase their share when the parties sit down to discuss the new agreement.

There is a lot of positioning and messaging going on at the moment from the various parties, but the hard talk has yet to start.

Like I said, it’s not just about the fans it’s also about where the money is comming from and who is really paying the price for our free F1. But I don’t want to repeat my whole post so……. On this matter:

No doubt F1 will bring itself to the brink of destruction in an atmosphere thick with threats and allegations before everyone becomes best pals again at the last possible minute when the reality of the path they have laid before themselves suddenly dawns. Apart from the fact that things are going to get a whole lot worse before they get any better, the other thing you can be sure of is that ultimately F1 will survive and very little will have changed when the dust settles. Or will the new breed of team principal (Whitmarsh, Horner etc) combined with Todt realise much quicker than the old Mosley, Briatore, Mosley, Montezemolo quartet that the more the different factions publically smear each other the more pointless, indulgent and self aggrandising the whole sorry episode will get. We can but hope! Sometimes in the past you were left wondering whether the Moseley’s and Briatores were fighting for F1 or themselves – I think I know the answer!

It is true what others have said about your comments. You are a true fan. Your only interest is that of the sport. You want it to be a leader in entertainment, value, and ethics. It is a view every fan on this site would agree with in principal, but likely not in action.

The challenge comes from the fact that humans run F1, not R2D2 or Robocop. That means greed plays a role. Getting a slice plays a role. And in the case of money, yes – taking money from questionable sources plays a role. Everyone has read Animal Farm. Once it their role, we would find it hard to stick to a set of values we currently say we have. Let me play devil’s advocate here. Could we say that FOM, Bernie and co. don’t have it in their job description to make political statements? Could they have come in with the same view but realized the reality of the situation is different? Could we say that these are men who have done the entry levels of business and are now at a black-belt business level and have to answer to different set of values? Who is “F1″ to make a statement in society at it’s own sacrifice? Is that is reason for it’s existence? I’m with you that it could do those things – but should it?

You know who is really paying the price of our free F1 – you said it. It’s the same people that make filling up your car with petrol at today’s affordable prices possible. The same people who make it possible for your iPad to be $499, iPhone to be $199, router to be $49, laptop to be $299, DVD player to be $19.99, T-shirt to be $2.99, pack of dozen socks to be $1.99, etc. etc. etc. because it’s assembled by an army of underpaid, overworked, depressed workers in societies a few decades behind ours. I know we have emotions and conscience and want to be ethical and noble. But F1 is by far not the only participant in the economy that surrounds us.

If we don’t agree with the way the product is financed, we have the choice to decline participation and make our statement. Same as you have a choice to not buy that iPad, or that t-shirt, or drink that non Fair-Trade coffee. You the consumer decide with your wallet and your time. And it seems the TV ratings would say, we talk a big talk, but we walk the walk of shame on the ethical side you brought up.

Guess what would happen if we all watched only the races we liked in countries that have a good human rights records, established democracies and the like. If we absolutely didn’t watch the races that we don’t agree with – like Bahrain, or Abu Dhabit or China. Or if F1 fans would organize and vote in the 3 most boring race tracks and said – whatever the situation we don’t watch those three – PERIOD. Guess how long it would be before F1 stopped going to those race tracks? Or those countries? I’ll tell you how long – next race track contract renewal cycle. That is how much power we F1 fans have. We vote with out remote controls, and they run the show simply by stats. If you don’t believe it, may I just remind you about the weird start times races have been getting around the world. Who’s the #1 voting citizen in this “election”? European F1 Fan. Start voting.

Can’t disagree with anything you say here. Except pephaps if you lived in the UK you wouldn’t think that petrol at today’s prices was ‘affordable’

All you say is logical and well reasoned – I just want the likes of Bernie and Todt to know that we are not all clueless fans who accept everything they say. I do not expect F1 to change because of me or 100 people like me. F1 is indeed representative of the world we live in I just don’t think it hurts to call them out now and again!

Besides I hate being patronised and that is how I feel when I listen to certain guys and gals in F1.

OK, here’s an idea. A ‘World Fan Grand Prix’. During the winter testing period each year, an official F1 sponsor gets to run a poll on their website which is cross marketed by other F1 websites. The poll is ‘vote for the World Fan GP of 2011′. Whichever Gp gets the most votes becomes the official ‘World Fan GP’ of that year. FOM spend a miniscule fraction of the billion revenue to subsidise (say half price?) say 20,000 tickets. A couple of hundred fans who entered the poll win the full hospitality package, ten fans win a day with the favourite team and accompanying merchandise, one fan gets to wave the chequered flag and then keep it…… and the circuit gets to market itself as the ‘World Fan GP of 2011′.

Literally everyone wins:

FOM has an excellent ‘for the people’ marketing tool. F1 is seen as a global sport that is intent on looking after the little guy. The cost would be relatively small.

The sponsor hosting the website gets massive F1 traffic through their website made up of hundreds of thousands of voters. Is seen to in a positive light by the fans for sponsoring something on their behalf. Is likely to be happy to bear some of the cost for this privilege.

The circuit itself becomes “Silverstone – World Fan GP 2011!” Which I am sure they would enjoy slapping across all their merchandising and advertising. What an incredibly positive endorsement! And may well also be inclined to bear some of the costs involved.

If FOM are not interested in stumping up the cash maybe FOTA would be? “The FOTA World Fan GP” has a nice ring to it doesn’t it? Likewise ANY sponsor is likely to want a piece of the pie; “The Vodafone World Fan GP”, “The Mercedes World Fan GP” etc etc….. I can’t think of a more popularist F1 campaign to sponsor to be honest. The main sponsor would become F1′s ‘good guy’ over night. Bernie could probably actually make money out of this somehow…………

Fans feel loved – it would feel like there is an entire GP dedicated to them.

Only one rule, you cannot vote for your own GP (easily enforced via the IP address) otherwise China wins every year simply because they are the most populous!

The problem with all these agencies and banks making predictions is that they’re based on some crazy schemes or “funny” software and it’s usually nothing to do with reality, it’s a virtual world that has sadly taken over the real world. Hard to imagine how one can trust bankers: virtual debts, virtual packages, virtual money, real life accountants and hard currency popping up somewhere in off-shore tax havens. I’m not saying it’s the case of F1, not at all.

It’s amazing what a human brain can come up with just to be able to get a private jet or a yacht. Looking forward to some drama before the signing of the new agreement. Breakaway series? Again?

When inflation’s 5% you need 5% growth just to stand still. In real terms F1′s perhaps going backwards? It seems to me like the teams are working more for less – pretty much like the rest of us, I’d guess.

Whilst I acknowledge the historic team’s value to the sport, I’m not too sure I think it’s fair that their pay reflects that. Factor in the revenue they’re also able to generate from merchandise and the relative ease with which they can attract sponsors, and it’s difficult to see how the likes of Virgin and HRT really stand much of a chance at all.

James,
Can you provide exact figures or estimates on how it brakes down?

I’ve heard some things like Ferrari gets more for being Ferrari than RBR gets for being the champion or something like that. I’m quite sure if these are silly statements exagerating the inequality (like saying the lettuce contains the most fat at McDonalds, etc…).

Are Willaims/Ferrari/McLaren named or is it on a $/year exponential growth pattern? Is Ferrair getting more like their (stupid) veto than any other team will get for being in F1 as long? Is it via team history or name? i.e. does Sauber count its BMW Sauber years? And can Lotus count its CC years? Can Red Ball count its Stewart years?

This really intrigues me, and given how much time certain teams spend moaning about the back markers, maybe giving HRT and Virgin SOMETHING rather than nothing might actually help them… you know actually compete.

Loosely based on a teams’ historic importance, if they finished in the top 10 in the Constructors Championship in two of the previous three years, and teams that have finished in the top 10 in the previous season, and those that have done neither.

And we as fans look forward to yet another year of bickering between FIA, FOTA, and politicizing a sport (at least, that’s what it is pretending to be) to get more money in their pockets so they can buy another penthouse in Monaco.

The teams should 1) advise the FIA that they are from 2012 forming their own championship and offer them (the FIA) the opportunity to be their official referee’s and 2) advise FOM that the teams are forming their own championship from 2012 and offer FOM the opportunity of tendering (for say 5 or 7 years) for the promotion of the all new FOTA championship.

For sure the squeals will be loud from both the FIA and FOM (CVC) but they will (they do) know that without the teams they are nothing (yes the FIA have other championships but it’s F1 tat matters).

But maybe FOTA could call FOM’s bluff and form a breakaway. Then the pressure is on FOM to provide the TV companies with a full grid. Not only that but the demand for tickets would be significantly lower, putting more pressure on FOM to sign cheaper deals and significantly lowering their income to the point they could not cover the interest on their loan.

As said, the new championshi wouldn’t have any tracks, and many places wouldn’t want a track anymore more because they wouldn’t know ifthey are getting the formula 1 they know under a different name or Formula 1 whihc they don’t know.

Are you for real? Are you trying to say the last few seasons with multiple championship contenders and more recorded overtakes than ever aren’t better than say 6 years of watching Ferarri cheat their way round to a 1-2 every week unless Reubens or Eddie binned it with all the excitement?

You don’t know what you’ve got till it’s gone. This famous saying applies to F1 too. Perhaps Ruppert needs more time to appreciate past races. Sometimes it takes a little bit of time to pass for you to realize how good the racing you watched was. As you saw by recent discussion there are various opinions on even the last race. Most of what I read in US media for example says it was quite a boring race, with the IndyCar race season starter being declared far more exciting. Europe seems to be more positive about the first race.
Which just goes to show you, the sport is highly personal and open to interpretations. Perhaps that’s why there is so much discussion on importance of the way it’s presented and the broadcasting personalities.

I recently looked over some old 1999-2005 F1 magazines, including the official F1 Magazine, and there was some really good racing during Schumi’s domination too, as well as exciting drivers we miss. Those Qualifying engines, crazy fast cars. Most circuits today have lap records set in this period. At the time many said it was boring. But exciting things happened.

As usual, some see it as half full, others as half empty. Depends on the day, the person and what liquid is in the glass.

Jenson Button might have convinced you with his WDC, but we are not all that easily bluffed.

The whole double diffuser was a clear attempt to rescue a failing team… just long enough for a buyer to turn up… and what better way, then to give the down and out team a free WCC and WDC.

It’s way to contrived on many many levels.

Racing is not just about random luck or internal politics deciding outcomes – I’d rather see one driver/team dominate if they are that good, and see who can topple them, then this artifical garbage of late.

Cars that can’t slipstream are not really cars at all, but merely disfunctional aircraft. They remind of the aircraft landing at Heathrow Airport, which require 4 minute seperation, as the turbulance affects the aircraft behind.

Agree! There seems to be a general idea that there is something “wrong” with F1 and that everything was better before. If anything, racing is better these days.

The Ferrari domination of early ’00s fels like distant memory, and to be honest is wasnt that bad anyway. 2002 and 2004 were brutal walkovers, but the other years had some good racing and close championship battles.

These days we have several teams at the front, exciting cars looking very different, close battles and arguably the strongest group of drivers ever seen in F1.

If I had a say FOTA should work towards lower ticket prices at the tracks, so we casual average joe fans could actually afford to watch a race live.

Taking into account inflation and the new races added, the marginal increase in revenue in nominal terms would actually work out to be a decrease in real/per race terms. Seeing as it is not possible to have any extra races, and that many of the promoters are not swimming in profits, I struggle to see the way forward to grow this business unless changes are made. I think CVC likely caught a break on the interest rate front given the lower interest rate environment but that is a one time deal and rates are likely not going to be lower if they have to refinance. Going to be real interesting going forward indeed.

Hi James, very informative informations over the last few days. On this revenue issue there was no mention about ticket sales. Has the ticket sales got anything to do with the increase of revenue last year?

One more question, do you reckon Schumacher’s return has had an impact on the better than expected increase in revenue? Schumacher’s return was a huge topic before the 2010 season & as I remember that the tickets were sold out in a lot of venues after his comeback announchment. Everybody said that it was a good thing while F1 was going through some really bad times in terms of politics and income. F1 even lost some well branded teams between 2006 & 2009. So, Schumacher’s return was financially and politically good for F1. Anyway, what do you reckon?

The exchange above is enlightening as they always are on this blog but I think it misses the most important point from this post.

The biggest question for me is how can a global brand like F1 manage to ONLY extract 1bn of yearly revenue. That sounds pathetically low and means that the people running the business haven’t been as successful monetizing the value of the brand.

I did a quick google search to compare revenue across sports. What I found was interesting and gives credibility to my point: revenue for sports in the US is as follows: MLB $6.8bn, NFL $7.8bn, NBA $3.0bn. F1 should be many times that given the sport’s global reach.

This is not to say that the current F1 management has not done a good job. I think they have in many areas. It’s just that although they have succeeded in increasing the global appeal of the sport, they have failed in monetizing its potential.

I guess the sport needs to be financially self sufficient so any increase helps ensure there are cars on the grid next season. No surprise that the teams are looking for a fair share of revenues, after all they bear the brunt of development costs to keep F1 at the pinnacle of motorsport. For non-car manufacturers the Williams + Parr IPO model brings further opportunities.

With most of the continents now hosting races the future could be more about sustainability than continued growth.

Will the new Austin circuit be the key indicator of overall health of the sport; if interest wanes after few years where next? Silverstone is not looking so bad now, is it!

Bit unsure about the definition of “long history of success” that qualifies a team to get the extra cash. I can understand Ferrari getting special payments (simply due to length of time in the sport regardless of results) but why does Williams continue to receive the dollars each year ? I acknowledge that they had excellent results in the 80s & 90s but, according to my hazy memory, they havent had a win since 2003 or 2004 (Ralf or JPM i think) and last driver’s champ was JV wayyyy back in 1997 ? Long history of success : Pffft !

Q1 : Not recent success.
Q2 : No. All I am saying is that I do not believe that Williams “qualify” for such cashola based-on some sort of “success-based” criteria. Will they get it forever ?
Q3 : Would LOVE it if we had Brabham, Ligier, Alfa Romeo, Jag, Minardi, etc etc still involved but would love it more if we had six (or more) teams fighting for a win each weekend instead of just the three. Spreading the money wider might actually make for a greater competition ?

I’m actually a longterm Williams fan (being an Aussie and jumping on their bandwagon in 1980 when AJones took the title). I just don’t like it when mediocrity is rewarded year-after-year.

Turnover is revenue, isn’t it? So what’s the profit that they make on 1 billion on this revenue? Also, 1 billion in revenue looks pretty ordinary when compared to 3.1 billion NASCAR generated in 2010 in what is an ‘All American’ racing affair.

It includes all 3 series of NASCAR – the cup series,the nationwide series and the truck series. I don’t see any reason not to compare two of the most popular motorsports series. It goes to show that despite a global reach, F1 is not very profitable neither marketable.

Yes. They are contemplating introducing fuel injection for 2012. There’s always been plenty of resistance from the fans who prefer to keep things “old school”. Just like some of us F1 fans still miss the 3.5 ltr V12s.

More to it,with Montoya already in NASCAR, Trulli,Kimi and other F1 guys contemplating a switch, FI engines will help guys not used to racing cars with carbs.

so Days of Thunder was really true in that sense. And NASCAR as both promotor and regulator of races is doing what it should do… grant licenses for racing… make sure things are safe, and sell the tv rights to broadcasters. Everything under ONE roof.

Now looking at our side of the pond…F1:
Boy oh boy is it a pain to want to go racing!… Folks like David Richards [CBE, Chairman of Prodrive and Aston Martin] just cant get a car fielded on the F1 grid…

Here are the things to do / the checklist:
1) all the business negotiations first by dealing with Bernie
2) then get approvals of the “Ferrari-Williams-Mclaren maffia” or cartel
3) then approval from the smaller teams maffia
4) then dealing with the FIA… to create a slot on the grid…

Mind you that steps 1-4 were just the behind the curtains… informal stuff… now the formal submission of papers start…. and then F1 turns into a backstabbing fest.

Not much in F1 in the spirit of ‘Lets go racing’..

I do feel ashamed of the sport I love to watch….

F1 may be a 1 billion raising sport, James, but we’ve got so much to learn from the Americans to make the sport to be more around the Spirit of Racing.

jmv, I agree! It is the spirit of racing that is missing in F1. The little guy is not really cared for. I’ve been a close follower of F1 and NASCAR for years now, and the difference between two from a fan’s perspective is staggering!

In F1, a spectator doesn’t really feel as a part of the action down there. In NASCAR, everything is so much more accessible. The fans have barbecue and beer going,mechanics and sometimes drivers jump in after testing for a hotdog and a cold Bud. As a fan, you feel that you are one of them!

And what about the pitcrew? NASCAR decided to honor the ‘unsung heroes’ – the pitcrew when they introduced the ‘pitcrew challenge’. I sincerely hope F1 does something similar.

It really does not surprise me that despite being a North America only series, NASCAR has revenues of 3.1 billion $ compared to F1′s 1 billion /year.F1 needs to do more for its fans. Speaking of marketing, how about making those merchandises a bit cheaper? I can pick up a NASCAR team T for 20$, it costs thrice as much for a F1 team T-shirt pushing more fans towards ‘fakes’ on e-bay.